This week, the U.S. House of Representatives will consider H.R. 4438, the “American Research and Competitiveness Act,” which would simplify, enhance, and make permanent the research and development (R&D) tax credit. Put simply, this bill and this vote will increase investment, competitiveness, and job growth here at home. Establishing a permanent R&D tax credit, inclusive of all technologies, will reward and incentivize domestic innovation in the U.S. and mark a real step forward in modernizing our outdated tax code. By creating a more stable and predictable tax environment, our nation and our businesses will be able to better compete in today's hyper-competitive global marketplace.
Since its introduction in 1981, the R&D tax credit has been extended 14 times. Suffice it to say that here at ITI, where we are regularly subjected to the drumbeat of the annual tax extenders exercise, we strongly urge members to vote “yes” and finally make the provision a permanent fixture in our tax code.
More than 30 years ago, we were the first country to create a tax incentive for R&D, and it’s no coincidence that its implementation overlapped with some of the most significant breakthroughs by U.S. tech companies that laid the foundation for our dynamic and interconnected world. Breakthroughs like multifunctional operating systems; lightning fast processors and semiconductor chips; digital image software for editing photos and video; and space-efficient servers, all of which made America the leader in cutting-edge technology. Today, however, the United States ranks 27th in R&D support. Our competitors have learned from our success and are now using robust R&D tax incentives to attract investment and spur their own domestic tech and innovation sectors, robbing the United States of an engine for job growth and economic strength. H.R. 4438 is exactly the sort of policy we need to help reverse this trend.
Members of Congress, if tax revenue is your concern, tax revenue you shall have. R&D incentives increase domestic and foreign investment, bringing new innovations and generating new patents, new products, and new jobs. All of this leads to more tax revenue. Research shows H.R. 4438 could increase the annual GDP of the United States by more than $66 billion and create more than 162,000 jobs in the tech sector alone. These are jobs that pay well, including engineers and researchers, those who operate and maintain equipment used in manufacturing, and those who sell and market the final products.
Incentives for domestic research and development have traditionally been something upon which we could all agree. It is an area of common ground for liberals and conservatives and results in strong bipartisan votes where everyone takes a victory lap. So, while we have seen political punches from both sides of the aisle in recent days, we strongly recommend that members let good policy, not politics, prevail at the end of the day. It’s past time to make the R&D tax credit permanent.